The Treasury Department is dismissing any talk of tensions with House Ways and Means Committee Chairman Richard Neal, despite recent events suggesting friction.
Treasury Secretary Steven Mnuchin has “a good relationship with Chairman Neal and looks forward to continuing to work with him on key Treasury priorities,” a department spokesperson said in an email. Neal, a Massachusetts Democrat, has also downplayed talk of tension and previously told reporters that Mnuchin will testify before the committee this month.
But the public statements stand in stark contrast to what has transpired since Democrats took control of the House in January.
Committee Democrats have repeatedly pushed back against Treasury’s narrative downplaying smaller tax refunds this filing season. The committee on Feb. 27 took the unusual step of releasing a complete report from the Treasury Inspector General for Tax Administration, after the watchdog released it with heavy redactions. There was also public back-and-forth over meetings between the committee and administration officials: A briefing between the IRS Commissioner Charles Rettig and the committee in mid-January didn’t happen, and soon after, the tax panel canceled a tentative hearing with Mnuchin after he declined, citing a scheduling conflict.
The administration’s priorities, including technical corrections to the 2017 tax law, could suffer if officials’ relationship with Democrats on the panel spirals downward. Fixes to the law would require bipartisan support. Committee Democrats also have ambitious plans, like funding an infrastructure plan and pushing a middle-class tax cut, but the dynamics of a divided government are adding to the challenges.
“It’s going to require some bipartisan cooperation, obviously, to fix anything” in the tax law, said House Ways and Means Committee member Ron Kind (D-Wis.), who told Bloomberg Tax that he finds Mnuchin’s current posture towards House Democrats concerning.
Jorge Castro, a former congressional tax aide now with Miller & Chevalier in Washington, said both Neal and Mnuchin know the importance of a constructive relationship. There will be times when they don’t see eye to eye, but both understand that being able to work together will go a long way toward their advancing legislative priorities this year, he said.
Taking Aim at Tax Law
Neal and Mnuchin will likely continue to struggle to reconcile different priorities. For his part, Neal faces a balancing act between potentially competing visions of the committee’s progressives and more moderate lawmakers.
Tax filing season has given Democrats a launching pad for complaints that the tax law didn’t help individuals and families. In addition to making Treasury officials and lawmakers regularly have to defend the law, Democrats have lobbed criticism that the changes didn’t actually make the system simpler.
Neal and Rep. John Lewis (D-Ga.) for the second time asked the Internal Revenue Service for information about who vetted the usability of the new individual tax return—the Form 1040—which was modified to reflect changes in the 2017 tax overhaul. Neal and Lewis also asserted in the Feb. 28 letter that references to a 1040 usability survey were scrubbed from the IRS website after their first request.
Treasury officials have maintained that smaller refunds this year are a result of changed withholding tables and larger paychecks throughout the year, amid criticism from Democrats. Figures for the week ended Feb. 22 show the average tax refund is up by about 1.3 percent this filing season, an improvement after data from the week before showed the average refund had dropped by about 17 percent.
Officials from Treasury and the IRS briefed committee staffers about tax issues and the partial government shutdown in January, although Neal had requested Mnuchin appear.
Kind said his advice to Mnuchin would be to do more outreach with the Democrats so there can be a constructive relationship in the future. So far, committee Democrats haven’t had an informal meeting with Mnuchin, he said.
The IRS didn’t return a request for comment.
The dynamic with Mnuchin so far stands in contrast to the relationship some lawmakers have with U.S. Trade Representative Robert Lighthizer, who worked on the Hill previously, a former top House aide said. The aide described a Feb. 27 Ways and Means hearing with Lighthizer as a “love fest.”
The TIGTA report that the committee released in full tied Mnuchin to IRS guidance that sought to block states from working around the tax law’s $10,000 cap on state and local taxes paid.
The SALT cap has been one of the most partisan components of the 2017 tax changes. It is unpopular in high-tax blue states such as New Jersey, New York, and California. It is among the areas that Democrats hope to tweak in the coming months, though that would be a major battle in a divided Congress.
The decision to release the previously redacted portions of the report was because “we were looking for an accurate depiction of what the thought process was that brought about capping the SALT deduction,” Neal said.
Mark Mazur, who served in the Treasury Department as an assistant secretary for tax policy in the Obama administration, advocated against reading into the release of the unredacted report.
“I don’t find this all that different than in the past,” said Mazur, who is now at the Urban-Brookings Tax Policy Center.
Tension To Come?
Rep. David Schweikert (R-Ariz.), a committee member, said he doesn’t expect the relationship between Treasury and the panel’s Democrats to be an issue when it comes to implementing the tax law or making technical fixes.
“I do see some political posturing, but that’s the nature of the beast,” Schweikert said.
One former House Republican aide pointed out that much of the day-to-day work on policy matters, like technical corrections, happens at the staff level. That is where there has historically been a mutual respect between lawmakers and Treasury in trying to find workable solutions to flaws in enacted law.
Any disputes between Neal and Mnuchin certainly can’t help, and getting Democrats to agree to the fixes this year was already going to be an uphill slog. But the technical corrections process may be somewhat insulated from what is happening between the principals, because so much of the work is done by staff, the former aide said.
The relationship between Neal and Mnuchin could become more strained if and when Neal follows through on promises to ask for President Donald Trump’s tax returns. That request could come potentially within the next few weeks, according to NBC News.
Treasury could seek legal recourse to try to delay release of the returns.
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